Buying activity is up in the Twin Cities — especially for homes under $200,000. But low interest rates and the $8,000 federal tax credit, which expires at the end of April, are driving a lot of the activity.

Since June 2008 I have rented in Northeast Minneapolis with roommates and made the decision to start the home buying process in December 2009. I had been aware of the tax credit for new home buyers for a few months, but I hadn’t imagined myself taking advantage of it until I watched my cousin buy a house in Minneapolis in November.

When the buyer deadline was extended to April, I thought, “Well, maybe I should think about doing the same thing.”

My family was a big part of my decision and home buying process…although I am buying the house by myself, my parents will have one of the guest bedrooms “on reserve” and will help me with home improvement projects.

While family and investment value were the original motivation for my choice, the tax refund was a huge part of making it a feasible option. I have a job and savings, but $8,000 really makes a big difference. It just made buying a home that much more accessible — both emotionally and financially.

I found a home in South Minneapolis in January … I made my offer hours after first viewing it. I’ll close on the house in March. When I receive the $8,000 refund later this spring or summer, I plan for most of it to go toward moving expenses and future home repairs. It will help me maintain a manageable budget and still give my new 110-year-old home some updates over the next few years.

Melcher said she looked at some foreclosures and short sale properties but was hesitant to go that route.

“I was not looking for a major renovation project, and I need to be able to move in by the end of May at the latest — so, knowing the unpredictable nature of short sales, those properties didn’t seem like the best option for my situation.”

The credit, she said, made a big difference and it put a home investment within reach sooner than she expected. “There are some great values out there on the market, and I’m hopeful that my investment decision will turn out to have been a wise one.”

No doubt the Twin Cities market is better because Melcher and others are buying. The real test comes when the tax credit ends and rates starts to rise. The Minneapolis Realtors group is bracing its members to “expect a second (smaller) dip in sales and prices” later in 2010.